Critics believe the chancellor is being too timid, and not making the major changes to regulation and supervision that are needed to avoid a repeat of the financial crisis.

George Osborne, shadow chancellor

Osborne tore into the proposals, accusing Darling of failing to admit the extent to which the current system failed. He told MPs that the white paper – which he likened to a white flag – only included a single sentence acknowledging that "some aspects" had been found inadequate.

"That's the understatement of the century, given that you've nationalised half the British banking sector."

Osborne told parliament that a Conservative government would abolish the tripartite system introduced by Gordon Brown in 1997, under which the Bank of England, the Financial Services Authority, and the Treasury share responsibility for financial supervision.

"Almost two years after the collapse of Northern Rock, isn't it the case that we still don't know who is in charge?" Osborne said. "The chancellor should have come here to bury the tripartite authority, not to praise it. The only thing that stops him is the arrogance of the prime minister."

Darling's proposed Council for Financial Stability would have representatives from the three authorities. Osborne, though, said the Bank must be in charge.

"We don't want more divided responsibility. We want clear lines of responsibility that run all the way to Threadneedle Street."

Vince Cable, Liberal Democrat Treasury spokesman

Cable was disappointed that Darling did not announce new powers to control bankers' pay, and accused the chancellor of missing a great opportunity to change the system and crush the "bonuses are back" culture. "I think this white paper will be received in the City with a huge sigh of relief, as another indication that we're getting back to business as usual".

With Barclays Capital determined to become the biggest investment bank in the world, Cable wants to see tough action to split these riskier activities away from standard deposit-based banking. "The bottom line should be that the taxpayer is not underwriting these enormous casino operations... It's fundamentally unacceptable."

"The big issue of the day, which I don't think this white paper will address at all, is that since it took over the banks, the government has let the situation drift. An enormous amount of taxpayers' money has gone in, but it's not clear that credit is coming out to perfectly good, solvent companies. We've still got a credit crisis, the bonus culture is running amok, and the government is adopting an entirely passive role through its shareholding body UKFI, and that's not good enough."

David Berman, financial services partner at law firm Macfarlanes

Berman, a former banker, is also unimpressed with the plans, which he believes will be made redundant by the forthcoming election.

"We must take these proposals with a large pinch of salt. It is likely that some of the key proposals, including the continuation of a tripartite supervisory regime, will be ripped up by an incoming Tory government, which would almost certainly hand back prudential oversight to the Bank of England," he said.

He also believes that the prospect of the European Union also demanding banking reform is deterring Darling from taking tough decisions: "The paucity of concrete proposals is perhaps explained in large part by the onset of a recently announced new EU regulatory framework and uncertainty as to how that will pan out."

Sir Brian Pitman, former chairman of Lloyds TSB

One of the key parts of the banking bill will be "macroprudential regulation", an attempt to ensure that the overall financial sector does not fuel future bubbles in credit and asset prices. Pitman believes it's a nice idea, but very hard to put into practice.

"Can you imagine a situation when we have boom conditions and somebody steps in and says: 'We've got to stop this now. We're going to put up the price of lending to stop the boom. There's an election looming, but we're still going to do it'? It's just not realistic."

Instead, he says, banks must be encouraged to put more money aside into reserve assets.

Pitman is also concerned that Darling will not shake up the tripartite authorities. "I doubt whether they're going to tackle this problem. It was a mess at the start and it's still a mess today, but you can't expect the architects of a system to admit that it's been a failure."

Angela Knight, chief executive of the British Bankers' Association

Knight warned that banks could flee the UK if the government imposed onerous regulations.

"We believe appropriate and effective regulation, capital applied according to risk, and good-quality supervision are the cornerstones of a vibrant banking community. We welcome moves to create better-coordinated financial stability jointly with the FSA and the Bank of England.

"Banking is a global business and reform needs to be thoughtfully handled so moves in the UK dovetail with those overseas, ensuring the UK sector remains competitive – otherwise business could move away."

Derek Chambers, equity analyst at Standard & Poor's

"It has been a common theme of international and national responses to the financial crisis that improved macro-prudential supervision is required. What still seems to be lacking, despite Mervyn King's request, is a specification of the tools that supervisors can use beyond sermonising."

John McDonnell MP

McDonnell, who chairs the Left Economics Advisory Panel (Leap), said the proposals were a "timid rebranding".

"Banking is a fundamental public service which should be under public control. The least the chancellor could have done would have been to split speculative banking from retail banking, and to bring retail banking under mutualised public control".

Rob MacGregor, national officer of the union Unite

MacGregor argued that the public should have a seat on the boards of all large financial institutions and at all levels of the regulatory structure of the financial sector.

"Without public-interest representation, we will simply maintain the risky business models and poor supervision of the past which lack the transparency that is essential and which the government is apparently now demanding. It is right that there is a more interventionist approach to regulation of this sector, specifically in the rules which determine the remuneration structures of these complex institutions."

He also supported the measures included in the white paper.

"Unite welcomes the government's acknowledgement that the financial regime must be changed fundamentally in order to bring stability to the banking sector and ensure it can never again undermine the UK economy. This white paper presents a number of bold and radical plans to prevent further crises in the financial industry, though it remains a fact that thousands of finance workers are every month paying the price for the corporate greed, excess and recklessness of the City as they lose their jobs and pensions."

About this article

The banking white paper: what the experts say

This article was published on
the Guardian website
at 09.22 EDT on Wednesday 8 July 2009.
It was last modified at 09.10 EDT on Wednesday 11 June 2014.
It was first published at 04.39 EDT on Wednesday 8 July 2009.